Analysing costs associated with direct purchase from Jardensteel
Discuss About The International Private Capital Flows And Developing Countries?
This is a business report which has been prepared to assist the purchasing manager Barrett Mann to come up with an economical purchase decision for the benefit of the firm. In the document a quantitative and qualitative analysis will be conducted on the two companies Jardensteel and Parker regarding their option to supply Atmel with steel. Furthermore, will review the ethical codes and indicate their effects in making a business choice.
To evaluate if purchasing the required slit steel directly from Jardensteel is the better option we need to evaluate all the costs associated with the purchase.
As per the past information that Atmel Ltd have all the two companies are from the locality and have in previous occasions worked with the firm. In their previous engagement the companies have proven to be reliable vendors who can be relied upon for delivery of quality products.
The time taken to deliver the required slits from Jardensteel to Atmel is 15 days from the day a purchase order is put in place.
On the other hand, it takes 5 days to deliver the 49-cm width steel to Parker from Jardensteel, Parker on the other hand takes 10 days to deliver the required slits to Atmel which in total makes the delivery time to be 15 days from the time a purchase order is placed at Jardensteel.
This indicates that the delivery time is similar in both options and should not be a variable of concern when making the purchase decision.
As per the invoice
Cost of 5cm width steel
Cost of 9cm width steel
The total cost of steel is
Freight and handling cost
The total cost of purchasing the products directly from Jardensteeel will then be
To decide whether to purchase the required width directly from Jardensteel there is need also to analyse the costs of the alternative to making an economic decision quantitatively. The aim of the firm is to maximise the revenues and reduce costs. When the product quality is similar then the firm will opt for the option that minimises the total costs associated with the purchasing process.
Analysing the costs associated with purchasing the output at Parker Pty
The costs associated with purchasing the output from Parker
Total cost of input
Freight and handling charge
Costs associated with purchasing the required steel from Jardensteel
Total freight and handling cost
5cm width steel
Total output cost
The total cost which is associated with purchasing the required slits from Parker Pty limited will be;
From the above evaluation of costs purchasing of the required slits directly from Jardensteel will cost the company $32490 while purchasing the output at Parker will cost the company $32106.83.
This is $388.17 cheaper and should be pursued by the company. In conclusion it is not economical to purchase the required steel slits from Jardensteel instead the option provided by Parker should be selected.
Taking advantage of the discount offered by Parker
Costs associated with the discount
Freight and handling cost
Jardensteel to Parker
Parker to Atmel
Total will be $2800
Amount stored is tonnes
Amount stored tonne
By taking advantage of the discount offered by Parker Atmel will be purchasing the product at the cost of $219.01 per tone on the other hand purchasing the intended quantities without regard to the discount offered Atmel will be purchasing the material at the cost of $221.43 per tonne. Comparing these values, we observe that taking advantage of the discount provided by Parker will be the optimum economic decision. By doing this the company will save $2.42 for every tone purchased.
Irrespective of the costs associated with the purchase from the various firms, Atmel may still opt to purchase from Jardensteel rather than Parker is the culture of the organization supports their business objectives. Culture is the environment that a firm has developed for its operations. This entails the values, beliefs, attitudes and assumptions that are tolerated by the firm. The culture of Jardensteel may be intolerant to corruption activities. In addition, the personnel at Jardensteel including the management and employees may be courteous and honest hence prompting Atmel to rather work with them.
Moreover, the Jardensteel response to changes may be favourable to Atmel. In placing its order, the firm might miscalculate some aspects and may later make alterations. In addition, the firm may make some modifications to the previously placed orders. If Parker is inflexible and does not tolerate modifications to orders one places, then the firm shall rather work with Jardensteel. Placing an order via Parker is a long process. It must factor in both the situation at Jardensteel as well as Parkers, in these situations making changes will be a long procedure as it must start and be accepted by both the companies. It is therefore advantageous for Atmel to work with Jardensteel directly.
Analysing the costs associated with purchasing the output at Parker Pty
The objectives of Jardensteel as an organization may be in line with Atmel’s targets. Businesses normally engage in several non-profitable organizations for the benefits of the society. If Jardensteel ideas in promoting quality living in the society are in line with Atmel, then the two companies may develop a strong business relationship which might see Atmel choose Jardensteel as a supplier (Sutton, 2006).
As per the integrity code of ethics Barrett Mann should demonstrate personal integrity by doing what is right. In this scenario shifting the company option to fulfil a friend’s request will be wrong. Barrett should withhold the pressure and stick to the preferred choice of supplier.
Objectivity demand that the judgement of the operations manager is professional. From the professional point of view the business has analysed their purchase option and decided that settling for Jardensteel limited will be an optimum choice. The manager is therefore obligated by objectivity to not compromise his decision due to undue influence from a friend who wants to make a profit despite his organization’s failure to be market competitive (Grabel, 2003).
Barrett on his role as the purchasing manager should ensure he is qualified to offer efficient services to the company clients. One of the ways of showing adherence to professional competence is maintaining his ability to make professional decisions this will be proven by ignoring his friend's request.
The phone call by one of Barrett Mann’s friends in Parker limited indicates a breach of confidentiality. There are employees in Atmel who seemed to have revealed to parker agents that the contact from Atmel may go to Jardensteel. This breach should be investigated, and the source punished for the organization to compel its employees to observe the confidentiality code. Barrett being the man in charge should be tasked rectifying the issue (Lafferty, 2002).
Via observation of the ethical codes discussed above the firm will be making a step in promoting professional behaviour. This should be added to adhering to the laws regulating purchasing and suppliers. This will ensure the organization upholds the reputation of the reputation of the industry.
Finally, Barrett Mann is demanded by the due care code to ensure his actions do not hurt other businesses or the industry. By allocating the purchasing tender to Parker based on interest from a friend the firm is not giving other organizations an opportunity to compete in a healthy manner. This only promotes inefficiency in Parker limited as they continue to use illegal means to do business and high jack contracts to other firms (CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS, 2005).
In the making of business decisions it's important to consider all the variables quantitative and qualitative that are of concern to the issue.
The document has analysed the costs associated with purchasing the material orders in both the Jardensteel and Parker company. Parker is apparently offering the best deal with a bumper quantity discount but when the qualitative aspects are taken into consideration then Atmel find it more convenient to work with Jardensteel. Issues such as business culture, management objectives and flexibility when it comes to accepting changes have apparently supported the management decision to work with Jardensteel rather than focus on Parkers appealing offers (Davenport & Harris, 2007).
Furthermore, business representatives are demanded by professionalism to further the firm’s ideas in the case of Barrett Mann despite having a friend at Parker who intends to shift his decision based on their favour must take a position that is of interest to the firm. The ethical code of conduct of Atmel that entails integrity, objectivity, professional competence, due care, confidentiality and professional behaviour should acts as a guideline to the purchasing manager on the way to make his judgements. It's therefore essential to disregard personal relations with potential clients and take sides that support the firm’s ideas of doing business (Bartlett, 2013).
Bartlett, R. (2013). A Practitioner’s Guide To Business Analytics: Using Data Analysis Tools to Improve Your Organization’s Decision Making and Strategy. McGraw-Hil.
CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS. (2005, July). Retrieved from https://www.ifac.org/system/files/publications/files/ifac-code-of-ethics-for.pdf
Davenport, T. H., & Harris, J. G. (2007). Competing on Analytics: The New Science of Winning. Harvard Business School Press.
Grabel, I. (2003). International private capital flows and developing countries in Ha-Joon Chang (ed.). Rethinking Development Economics, 45-325.
Lafferty, A. H. (2002). Human Resource Management in Australia. Melbourne: Oxford University Press.
Sutton, J. P. (2006). Evidence-Based Management. Harvard Business Review.
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